Liquidated Damages and Multiple Causes of Delay: How is Responsibility Apportioned?
Delays are an unfortunate but all-too-common reality in the construction industry. Even in the best of circumstances, proving who bears responsibility for a delay is often a burdensome task. On the most straightforward of projects, delays are often at the hands of several parties, creating many convoluted and puzzling questions not only for parties hoping to recover some of the costs they suffered as a result but also for parties seeking to avoid such damages because they did not contribute to the delay.
Consider a building project where the owner delayed the delivery of a concrete block because it made late design changes. Suppose further that, even without these changes delaying delivery of the block, the masonry installation of the block could not move forward because the excavator on the project was behind schedule and had not yet completed the necessary predecessor work. When the project finishes late, the owner assesses liquidated damages against the contractors. How does this delay get apportioned, especially in light of the fact that the owner, arguably, caused some of the delay?
It’s not meant to be a riddle: these are common issues in the construction industry and this example is based on a real case. These concurrent or intertwined delays can render apportionment of responsibility a difficult and sometimes impossible task. In using the example above, the owner will argue that it did not cause the delay because the excavation work was not yet finished and work could not be done anyway. By contrast, the excavation contractor is going to argue that it did not cause the delay because, even had the excavation work been finished, no material could be delivered due to the design changes. This is an overly simplistic example. It is often the case that such an issue occurs in the realm of dozens of contractors, involving different situations causing delays. Although there is no uniform approach in the courts, it generally used to be the case that a party would be precluded from seeking liquidated damages if that party also contributed to the delays on the project. This is because, prior to expert scheduling analysis, there was not a very reliable and accurate way of apportioning responsibility for multiple delays on a project. Without such a tool, parties and courts alike struggled to pinpoint a fundamental element of any construction delay claim: causation.
With expert scheduling analysis, however, the modern trend that courts employ permits a party to recover if it can prove, with some degree of specificity, who is responsible for what amount of the delay. Notably, this is not necessarily a shift in the paradigm, as many courts are still applying the same rule as they did in the past. Rather, over time, parties using expert scheduling analysis have been able to more effectively and efficiently establish responsibility for various delays.
In considering again the example above, if the owner employed a scheduling expert to conduct a delay analysis, and that expert provided a data-driven report with a conclusion that 75% of the delays were caused by the excavation contractor, and 25% were caused by the owner, the owner may still be able to recover 75% of the liquidated damages from that contractor. Under the former approach, the owner may not be able to recover any of the liquidated damages, despite the determination that the contractor was 75% responsible.
For owners, contractors, and subcontractors alike, it is important to be cognizant of the complexities of a delay claim when multiple causes of delay exist. Aside from the difficulty in establishing who has caused what delays, courts have also taken inconsistent approaches to analyzing these issues. While it appears that courts are trending in the same direction, there remains some uncertainty. For now, it is imperative that parties are aware of the various moving parts in such circumstances to avoid problems in the future.
